There is an increase in demand of 100 units at each price and a decrease in supply of 100 units at each price. In the graph below, draw the new demand and supply lines. Instructions: Use the graphing tools, 'D2', 'S2', to plot the new demand and supply lines on the figure and then use the grid lines to determine the new equilibrium price and quantity
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There is an increase in
Instructions: Use the graphing tools, 'D2', 'S2', to plot the new demand and supply lines on the figure and then use the grid lines to determine the new
Solution: The equilibrium occurs at an intersection of demand and supply i.e. a price $400 and quantity of 120. When there is a rise in demand of 100 units at each price it causes a rightward shift of demand curve i.e. at $400; and 220 units (= 120 units + 100 units) will be demanded. A decrease in supply of 100 units at each price causes a leftward shift of supply curve; and 20 units (= 120 units - 100 units) will be supplied. New equilibrium will be at a higher price
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